Create A Dollar, Retire The Penny
December 5th, 2006 at 02:40 amOver the course of my travels, I’ve acquired a taste for many things foreign. Argentinean steaks, Swiss chocolate, Australian friends (and beer!)
And dollar coins.
Nothing is easier to use than the dollar coin. How many times have you been denied a packet of Cheetos from the vending machine because your dollar bill was too wrinkled? How about trying to buy a train ticket from the auto dispenser only to kick the machine in disgust as the train rolled off towards town without you? And who can forget those oh-so-fun washing machines and parking meters that refuse to take anything not in metallic form?! The dollar coin would eliminate all those problems as they are easier and quicker to use, which I can attest to from experience. For when the free bus is about to head back to campus and you’re trying to buy a case of Old, nothing is easier than feeling for that extra dollar coin in your pocket and paying with time to spare.
You don’t look convinced. I can see the Americanism in your eye, that look of “Oh no, it’s weird and foreign! Get it away!!” Okay, let’s start even smaller then. Don’t worry about all those other crazy foreign ideas, like the dollar coin or the metric system or even the absurd thought of abolishing capital punishment. Let’s get even smaller.
Let’s get rid of the penny.
It’s useless. It’s antiquated. And it’s costing you money. That’s right, a single penny now costs 1.4 cents to produce. Gee, makes sense to me to keep it around then! 99% of the machines I described earlier refuse to even accept pennies. Hell, the penny is the only monetary form that people are so desperate to get rid of, that they happily drop them off in the “Take A Penny, Leave A Penny” dishes at their favorite Kwik-E-Mart. If we seriously proposed eliminating the penny, we wouldn’t even have to fight the Abraham Lincoln lobbyists seeing as how Lincoln isn’t just on the penny, but on the $5 as well. I’m not joking here, most ex-Presidents have “supporters” who still work to keep their memories around, as absurd as it sounds.
So we all agree now that the penny is a pointless and needless item in our lives, right? Fantastic.
Then allow me a moment to speak to my favorite Shyzerian: the federal government.
Guys, please don’t screw this up. Those past dollar coins you’ve produced have sucked to a level I didn’t even know existed, even for you guys. You must have spent millions of dollars in advertising for those Sacagawea coins back in 2000 and then you proceeded to mint a grand total of 12 to toss out into circulation. Fine, you might have actually put out more than that, but I can’t tell you the number of times I had store clerks look at them and wonder if they were even real tender. And those Susan B. Anthony coins were an even bigger hit the year before! Let me tell you, nothing screams “Buy these new shoes!” like a frowning, angry feminist! So come on, let’s get this right. Quit making the dollars gigantic. Quit making the dollars the size of a quarter. Pick a size just a little bigger, make it slightly heavier, slap on a few dead white guys, and call it a day. Let me worry about convincing the American public.
You can thank me later, preferably with many Zachary Taylor and Franklin Pierce coins.
Stan http://www.circleofjerks.org
So with your proposal of elimating the penny, every business in the world would have to spend money to reprint every entire sign in their stores to even numbers instead of the usual “.99″, “.98″ or “.97″ price ender. Which means they would also have to either drop the price of each product to “.95″ or round up to and even dollar amount. That is going to cost one of us money. Either the retailer or the consumer. Which do you think will eat the cost? It wouldn’t be the consumer, that’s for sure.
So now we have a product that has risen .03 cents in cost. Let’s use a trip an average trip to Wal-Mart.
Everyday more than 176 million people visit a Wal-Mart, Sam’s Club, Supercenter, etc. If Wal-Mart raised the price of thier products just .03 cents to an even dollar amount that would result in $5,280,000 added profit to Wal-Mart everyday. $5,280,000 a day x 363 days a year (I’m excluding Christmas and Easter which are much lighter than average shopping days) = $1,916,640,000.
You just made Wal-Mart an extra $2 billion dollars a year. And thats assuming each of those 176 million people only bought one item. I can’t find any info on what the average number of items purchased on each ticket is for Wal-Mart but I think we can safely assume it can be at least 10 items (but I’m assuming it be a significantly larger number seeing as how many items a family purchases for groceries). Even so, if the average number of items purchased for each customer was 10 items. You’ve just made Wal-Mart an extra $20 billion dollars a year.
Now if Wal-Mart reduced their prices by just .02 cents and a rounded .95 price ending, then the company loses $3.5 million per day. $3.5 million x 363 days = $1.2 billion dollars per year that Wal-Mart would lose each year. If each person bought an average of 10 items then they have lost $12 billion each year.
Now that’s just one company. Imagine if every company in the United States increased their prices by only a couple of pennies. Look at the extra money it makes them.
Then we as consumers won’t complain because it’s only a couple of pennies and we wouldn’t notice it.
Or would we?
Now take into consideration the wages. The average Wal-Mart wage is $9.68/hour. Wages would either have to be increased to bring the average wage to $9.70 or decreased to $9.65. There are 1.8 million Wal-Mart associates. Raising the average wage .02 cents would cost the company $36,000 per hour. (That is of course inflated because there are not 1.8 million people working 24 hours a day). But lets assume that 20% of employees are full time (40 hours per week). That’s 360,000 employees. A .02 cent wage increase cost Wal-Mart $7,200 per hour for these employees. $7,200 x 2080 hours (the # of hours in a 40 hour work week for a year) = $14,976,000 a year. Raising the wages of just 20% of it’s staff cost them almost $15 million dollars.
Assuming the the rest of the staff works an average of 20 hours per week then you are looking at an extra $28,800 per hour. (1,440,000 x .02). Now then, $28,000 x 1040 (20 hour work week for a year) = $29,952,000.
For all of it’s employees Wal-Mart has just spent an extra $45 million dollars per year just off a .02 cent pay raise.
If they dropped the average wage to $9.65/hour they would cut $67,392,000 annually from their employees paychecks (using the above information).
Because you wanted to get rid of the penny you have made Wal-Mart an extra $20 billion dollars a year and taken away $67 million dollars from the people that keep the company running.
Imagine what this does to the entire population if you spread it out over all the business that don’t price products in non penny forming prices. You have essentially taken perhaps billions of dollars out of the hard earned paychecks of the people in this country.
I say we keep the penny. Either that or you reimburse me the money it’s going to cost me in the end. Which is $116.40 per year, roughly. $62.40 a year in lost wages, and $54 dollars per year in increased grocery bills at Wal-Mart. That’s not even including all the other things I buy at places other than Wal-Mart. You probably cost me an easy $500 a year because pennies annoy you.
There’s a million ways to do the math to say whatever you want it to say. You can even say that the prices remain the same as they already are and when the total rings out to be $126.96 then the bill just get rounded up to $127. Thus costing me an extra 4 cents for no reason.
Bottom line is, not all things can be done at profitable level. Some things just are unprofitable. It’s all the other things that are profitable that make up for the losses you take. When you buy your new computer at Best Buy, Best Buy is actually losing money on the computer. There just isn’t a mark up on computers. Computers themselves are just not proftable. They make up that loss when you buy a USB cable for $30 dollars when they only payed $3 for it.
Goob http://www.shyzer.com
Look at the math again and you’ll see it simply offsets Wal-Mart’’s losses and gains. If they round “.98″ and “.99″ up, they are making a total of “.03″ profit off those items together. If they round “.97″ and “.96″ down, they are losing a total of “.03″ profit off those items together. There’s no reason to lump the “.97″ into the group getting rounded up and and leave the “.96″ as the lone number being rounded down. Now, I can’t find any hard evidence that lists the numbers of items priced at each level, but I’d be willing to guess that it’s roughly the same. Even so, let’s say there are more items priced higher, thus there are more items being rounded up and thus Wal-Mart is making an extra $2 billion, give or take.
Your initial math had them gaining $8 billion a year off the rounding up alone, after offsetting for the rounding down prices. With my math, they break even, but again, let’s assume there were more items priced at “.99″ than “.96″, so they made an extra $2 billion or so. Sounds good for Wal-Mart, but now you’re assuming Wal-Mart is not running into any costs of their own. That added profit they make is offset by added price increases in raw products by manufacturers. Again, I’ve got no numbers (and wherever the hell you’re getting your numbers, do share), but you’ve got to remember that Wal-Mart is going to be subject to new prices as well beyond just the old “raise prices, lower wages.”
But even looking at your math, you had them gaining $8 billion dollars off prices and losing $45 million off wages if they rounded up. Big deal! As I see it, if they are making a few extra billion, they can certainly afford the $45 million “dent” in their labor side. Even with my cautious math, I gave them a $2 billion profit, which could still more than account for the added labor cost. I highly doubt they would run the risk of a media backlash against their blatant corporate greed just to squeeze a measly $67 million when they are already making a profit from the switch.
It’s not my fault a company chooses to round prices up, yet round salaries down when they don’t have to. That’s an entirely different debate centered around business ethics and morals.
Stan http://www.circleofjerks.org
Yesterday at Wal-Mart they were putting up freight and on the side of each box was printed, “Return this box for credit. Each box saves Wal-Mart 75 cents”. or something to that effect.
Wal-Mart did not get to be the way it is by not managing pennies. If you eliminate the pennies, it now has to think in terms of nickels. Imagine what Wal-Mart can do to the world with it starts thinking 5 times harder.
I agree with your logic of rounding up and down equally, I think I mentioned it towards the end of my comment. If not, I did intend to. It’s the most logical way of performing the adjustment. I just prefered the worst case scenario route. The info came from http://www.walmartfacts.com and a couple google searches.
But then what happens to gas prices with no pennies? Would it then jump a nickel with every increase, even if it would have only jumped .03 cents when there were pennies?
Goob http://www.shyzer.com
I’m not trying to bash Wal-Mart. I don’t particularly like some of their business practices, but I shopped there often during college since it was close and cheap. Nobody gets to be as large as they are without counting their pennies and making shrewd business moves and for that, Kudos to them.
Gas prices is a good question. I’m still weary over how gas prices fluctuate based on the price of oil. I bet they could come up with a system where .01 and .02 increases just stay the same and .03 and .04 round up. Thus, we’d have few gas changes compared to where they seem to change multiple times daily now, usually over just a penny or two.
Finally, I think I’ve gotten you cleared now, so all your comments should go through immediately as long as you don’t do no@no.com =)
old man neill http://www.oldmanneill.com
the reason the dollar coin didn’t work is simple…they kept the dollar bill in circulation. pull the bill, and the coin becomes the only option.
Jason Falls http://www.jasonfalls.com/rocker/
Let’s go a step further and get rid of the nickel, too. More here: http://www.jasonfalls.com/rocker/2006/12/29/five-simple-steps-to-making-better-money/
It’s interesting, at least.
Tom http://www.flickr.com/photos/elmerfishpaw
Hi Goob!
I’m 20 miles from Canada and visit often. The smallest note is a $5
The coins are the $1 coin (a “loonie”), and a $2 coin (”twoonie”). The Montreal Metro is so easy to get around with the money system, and the paper bills are hi-tech and nice to look at.
In my perfect world, we’d have no paper $1
the $2 bill common as the $1 bill is now, the Kennedy half would be alot more common too. Best to you from the North Country….
Tom (friend of your Dad’s friend J.B.)…